The ATO is currently targeting illegal phoenix operators associated with agriculture, forestry and fishing industries, in order to protect honest workers and businesses.
The agriculture industry is heavily affected by illegal phoenix labour hire firms deliberately going into liquidation, leaving debts behind, harming honest contractors and ripping off workers by not paying their entitlements and super. If a business uses a labour hire firm operating under a phoenix structure to hire their staff, they could be liable for the company’s debts and may face criminal sanctions.
Illegal phoenix activity occurs when a company has been deliberately liquidated to avoid paying its debts, including taxes, creditors and employee entitlements, and then continues to operate under a new company name.
The Australian Taxation Office (ATO) and the Phoenix Taskforce are currently targeting illegal phoenix businesses to protect honest businesses and workers in the agriculture industry.
If you use a labour hire firm to hire your staff, you should be on the lookout for illegal phoenix warning signs. Some of the most common warning signs include:
• If you are dealing with the same contact as last year, but they are now trading under a different company name.
• If the controller of the company is not the director.
• If the controller of the company has been associated with liquidations or de-registrations.
• If they ask you to direct payments to different bank accounts.
• If their tax and super lodgments are not up-to-date.
• If their quote is unrealistically low.
Before engaging a labour hire firm, ensure they have a proven record of paying debts and employee entitlements. You can ask them for proof that the company is compliant with their tax obligations and check if any directors or persons in control have ever been bankrupt or in receivership.
Case study: Agriculture business gets stung by phoenix labour hire operator
The below scenario outlines the consequences of engaging a phoenix company:
A banana grower from Northern Queensland relies on labour hire firm, Staff4You, to provide him with seasonal staff to assist in peak periods. Recently Staff4You changed their name to Staff For You, but as the director remained the same and the price was extremely competitive, the grower was happy to continue using them.
The grower soon notices a number of his contracted staff complaining about their salary being lower than expected and that their superannuation has not been paid. The grower soon receives a garnishee notice from the ATO relating to payments made to the labour hire company and discovers that the labour hire company has not been paying the staff correctly and has not paid payroll tax to the ATO.
The grower could now be held liable for the phoenix labour hire company’s debts, and face criminal sanctions that include:
• Fines of up to $54,000 per breach and liability for shortfalls in employee entitlements where contract workers employed by the phoenix labour hire operator are underpaid in your workplace.
• Liability for allowing or referring foreign workers who do not hold a visa or who are working in breach of their visa conditions even if the person was sourced from a referral agent, labour supply company, contractor or subcontractor providing the services. This can include fines for aggravated criminal offences of up to $54,000 and five years’ imprisonment for individuals and $270,000 for body corporate; all fines are per illegal worker.
The grower is concerned about the potential consequences to him so he reports Staff4You to the ATO to investigate.
If you suspect a labour hire firm is promoting illegal phoenix activity, you can report suspicious behaviour by completing an online tax evasion reporting form, emailing email@example.com, or calling 1800 060 062.
Find out more about illegal phoenix activity by visiting ato.gov.au/Phoenix.